The recent anti-suit injunction decision in Axis v Absa Group demonstrates the importance of considering the practical effect of jurisdiction clauses when a suite of contracts or (re)insurance policies are entered into.
This decision in Axis Corporate Capital UK II Limited and Others v Absa Group Limited and Others demonstrates the importance of giving careful consideration to the drafting of jurisdiction clauses in reinsurance contracts as well as their practical effect in light of the terms of the equivalent clauses in underlying policies.
ABSA Manx is the captive insurer for the Defendants (“Absa”) and had arranged reinsurance contracts with the Claimants (“Reinsurers”) in respect of its liability under two policies of insurance entered into for the years 2008/9 and 2009/10.
Each of the Reinsurers subscribed to one or more of the primary layer reinsurance contract (the “Primary Layer”), the first excess layer, the second excess layer, the third excess layer (the “Excess Layers”) and the aggregate retention reinsurance (“ARR”).
The Primary Layer, Excess Layer and ARR contracts had different jurisdiction clauses which, whilst similar in some respects, differed dramatically in others. The Reinsurers contend that proceedings brought against them in South Africa by Absa have been brought in breach of an agreement that the Courts of England and Wales should have exclusive jurisdiction.
Reinsurers therefore applied for an interim anti-suit injunction. The application was heard at an urgent ex parte hearing on 2 February 2021 where Mr Justice Calver granted the interim anti-suit injunction.
At a subsequent inter partes return date hearing, Mr Nicholas Vineall QC, sitting as a Deputy High Court Judge, heard Absa’s application to set aside the interim anti-suit injunction and the Reinsurers’ cross-application to continue the interim anti-suit injunction.
The Jurisdiction Clauses
The Court considered the Primary and Excess Layers separately.
The Judge agreed with Absa that the jurisdiction clause in the Primary Layer, which referred to “worldwide jurisdiction”, was “about as far away from an exclusive England and Wales jurisdiction clause as one could get” (paragraph 49). Reinsurers argued that, assuming the Excess Layers were subject to the exclusive jurisdiction of the Courts of England and Wales, the worldwide jurisdiction clause in the Primary Layer was subject to a proviso that "where a claim has impacted or would impact either the Excess Insurances and/or the ARR, the Defendants and the Reinsurers are obliged to submit to and to submit any dispute to the exclusive jurisdiction of the Courts of England and Wales".
The Judge held that this proviso could not be read into the contract as a matter of construction nor could it be implied. Whilst it would be inconvenient, and commercially undesirable for proceedings on the Primary Layer and Excess Layers to take place in different jurisdictions, this was “not enough to justify the implication of the term” (paragraph 54) primarily because:
- The term Reinsurers sought to imply could have undesirable results as well, for example forcing a claim to be litigated in England when only a small amount of the cover provided by the First Excess Layer is engaged;
- The jurisdiction clauses may represent a compromise solution agreed between the parties to resolve a disagreement when drafting the contracts. Whilst the solution may be inelegant, it would be wrong for the Court to resolve any such disagreement in a different way by implying a term because the Court thought it was an objectively better solution; and
- The inconvenience for some Reinsurers of having to litigate in two jurisdictions “reflects nothing more than the fact that they chose to subscribe to two contracts with very obviously different law and jurisdiction clauses” (paragraph 57).
The key jurisdiction clause in the Excess Layers states: “Any dispute concerning the interpretation of the terms, conditions, limitations and/or exclusions contained in this policy is understood and agreed by both the insured and the insurers to be subject to England and Wales. Each party agrees to submit to the jurisdiction of England and Wales to comply with all requirements necessary to give such court jurisdiction”.
Having found the Primary Layer jurisdiction clause to not be exclusive, the Judge held that the Excess Layer jurisdiction clause was exclusive. In coming to this conclusion, he found that:
- The distinction between transitive and intransitive clauses, which Absa had argued suggested a non-exclusive jurisdiction clause, was “so arcane as to provide little assistance” (paragraph 75(3); and
- The fact that the parties had chosen English law was a factor in favouring an exclusive interpretation of the jurisdiction clause. As the jurisdiction clause followed the English choice of law clause, which expressly referred to “disputes”, the jurisdiction clause could be taken as referring to the submission of disputes.
The Judge took into account the commercial advantages of exclusive jurisdiction clauses over non-exclusive clauses, and held that the service of proceedings provision in the contract in favour of South Africa was best explained by convenience and “weighed only lightly in the balance” as to the construction of the jurisdiction clause (paragraph 75(6)).
Given the lack of an exclusive jurisdiction clause in the Primary Layer, whether an injunction should be granted in respect of the proceedings in South Africa under the Primary Layer came down to a determination of whether those proceedings are vexatious, oppressive or unconscionable.
In deciding whether to continue, vary or discharge the interim injunction, the Judge held that “the mere fact that there will, on any view, be proceedings on the Excess Layers in this jurisdiction does not in my view render it necessary in the interests of justice to stop the Primary Layer proceedings in South Africa, and were I to do so I consider I would be interfering inappropriately with a claim which is properly before a foreign Court which has jurisdiction to entertain it” (paragraph 86). He was also not persuaded that England was clearly the more appropriate forum, as the centre of gravity for the issues in dispute is South Africa. He therefore declined to continue the injunction against the Primary Layer proceedings in South Africa.
The position regarding the Excess Layers was different. The contracts contained an exclusive jurisdiction clause, which the Court will ordinarily use its discretion to uphold unless strong reasons can be shown for refusing the relief.
In the circumstances, the Judge concluded that Absa had been unable to show there were strong reasons to refuse granting the injunction.
Noting that injunctions are a discretionary remedy and that it is not attractive to have proceedings in two jurisdictions, the Judge considered whether it was appropriate to use his discretion to grant an injunction restraining proceedings on the Excess Layers in South Africa.
In concluding that it was appropriate to grant the injunction sought by the Reinsures he observed that:
- There would be proceedings in both jurisdictions in any event if he chose not to grant an injunction;
- Having proceedings in two jurisdictions is simply a consequence of the fact that the parties entered into contracts with different terms;
- The bulk of value of the claim falls within the Excess Layers. It would be unfair if the dispute under the Primary Layer prevented the Excess Layer dispute from taking place in its chosen jurisdiction; and
- Failing to grant the injunction would be particularly unfair to the two Reinsurers who were not parties to the Primary Layer. Doing so would leave these two Reinsurers exposed to a claim in South Africa simply because their fellow Reinsurers had entered into a different jurisdiction clause in a contract to which they were not a party.
Jurisdiction clauses are often given less consideration than they should be. This case demonstrates just how important well drafted and consistent jurisdiction clauses can be, particularly where there is a suite of related contracts or insurance policies. Careful consideration needs to be given to the practical implications of any compromise reached on one contract that may give rise to inconsistencies best avoided.
Here, the Reinsurers were successful in obtaining the anti-suit injunction with respect to the Excess Layers, thereby restraining Absa from bringing proceedings against them in South Africa in relation to those contracts. While this certainly represents a victory for the Reinsurers in large part, given the quantum of the claims falling under the Excess Layers, the situation remains far from ideal given that there are still two sets of proceedings in two different jurisdictions addressing largely the same issues on the same facts.